The municipal market was mostly firmer yesterday, with some weakness on the long end, as a $1.5 billion offering from the Empire State Development Corp. hit the primary market, the week’s largest offering.
“There’s definitely some firmness out there,” a trader in New York said. “There is some decent trading activity. People that want to get stuff done are getting it done. We’re probably better a good two, three basis points at this point.”
“We’re mostly firmer on the whole, but there is a bit of weakness out on the longer end of the curve,” a trader in Los Angeles said. “I’d say there are gains probably through 20 years or so, but your longer-dated paper, around 25 or more years, give or take, I think we’re probably down a basis point or two.”
In the new-issue market yesterday, Goldman, Sachs & Co. priced its planned $1.5 billion sale of state personal income tax revenue bonds for the Empire State Development Corp. on behalf of the New York State Urban Development Corp.
The yield on $775.6 million of Series 2009 E taxable Build America Bonds was 5.77%, 150 basis points over 30-year Treasuries.
Besides the BAB series, the structure also included $501.5 million of Series 2009 C tax-exempt bonds, as well as $224.1 million of traditional taxable bonds in Series 2009 D. The top yield on the taxable bonds was 2.482% in 2013. Pricing information on the tax-exempt bonds was not available by press time.
The deal is rated AAA by Standard & Poor’s and AA-minus by Fitch Ratings.
The Treasury market was mixed yesterday. The yield on the benchmark 10-year note opened and finished at 3.33%. The yield on the two-year note opened at 0.76% and finished at 0.77%. The yield on the 30-year bond finished at 4.26%, after opening at 4.27%.
Yesterday’s Municipal Market Data triple-A scale yielded 2.89% in 10 years and 3.80% in 20 years, after levels of 2.93% and 3.80%, respectively, on Monday. The scale yielded 4.33% in 30 years yesterday, after Monday’s level of 4.29%.
As of Monday’s close, the triple-A muni scale in 10 years was at 87.7% of comparable Treasuries, according to MMD, while 30-year munis were 100.5% of comparable Treasuries. Meanwhile, 30-year tax-exempt triple-A rated general obligation bonds were at 104.9% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market, Barclays Capital priced $307.2 million of taxable BABs for the Los Angeles Department of Airports.
The bonds mature in 2017, 2019, 2020, 2021, and 2039, and yield 5.175%, 5.475%, 5.575%, 5.675%, and 6.582%, respectively, or 3.36%, 3.56%, 3.62%, 3.69%, and 4.28%, respectively, after the 35% federal subsidy. All bonds were priced at par.
The bonds were priced to yield between 185 and 235 basis points over the comparable Treasury yield. They also contain a make-whole call at Treasuries plus 35 basis points.
The credit is rated A1 by Moody’s Investors Service and AA-minus by both Standard & Poor’s and Fitch.
Bank of America Merrill Lynch priced $229.8 million of revenue bonds for the Iowa Student Loan Liquidity Corp. in multiple series. Bonds from the $165.8 million Series 1 mature from 2010 through 2027, with term bonds in 2031.
Yields range from 2.30% with a 2.5% coupon in 2011 to 5.87% with a 5.75% coupon in 2031. Bonds maturing in 2010 were decided via sealed bid.
Bonds from the $23.2 million Series 2 mature in 2023, 2024, and 2025, yielding 5.40%, 5.45%, and 5.55%, respectively, all priced at par.
Bonds from the $40.8 million Series 3 mature in 2018, 2019, and 2024, with yields ranging from 4.91% with a 4.875% coupon in 2018 to 4.87% with a 5.25% coupon in 2024.
The bonds, which are all callable at par in 2019, are rated A1 by Moody’s and A by Standard & Poor’s.
Morgan Keegan & Co. priced $125.5 million of GOs for Texas in two series.
Bonds from the $101.2 million Series E mature from 2010 through 2029, with yields ranging from 0.85% with a 4% coupon in 2011 to 4.18% with a 5% coupon in 2029. Bonds maturing in 2010 were decided via sealed bid. The bonds are callable at par in 2019.
Bonds from the $24.3 million Series F mature from 2010 through 2026, with yields ranging from 0.85% with a 3% coupon in 2011 to 4.15% with a 4% coupon in 2026. Bonds maturing in 2010 were decided via sealed bid. The bonds are callable at par in 2019.
The credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
JPMorgan priced $117.4 million of revenue bonds for the Massachusetts Development Finance Agency in three series.
Bonds from the $44 million Series V-1 mature in 2029, yielding 5.00% priced at par. Bonds from both the $63.2 million Series V-2 and the $10.2 million Series V-3 mature in 2014, yielding 2.875%, priced at par.
The bonds, which are not callable, are rated A2 by Moody’s and A by Standard & Poor’s.
In economic data released yesterday, the producer price index increased 0.3% in October as core prices dropped 0.6%.
Economists expected producer prices to increase 0.5% and for core prices to increase 0.1%, according to the median estimate provided by Thomson Reuters.
Industrial production inched up just 0.1% in October, and September’s industrial production was revised lower to a 0.6% increase.
Meanwhile, capacity utilization rose to 70.7% in October from an unrevised 70.5% the previous month.
